Cledara’s 2025 Software Spend and Benchmarks Report

EARLY ACCESS: This is an early release of our upcoming Spend report for friends of Cledara. You are welcome to share insights or charts from the report, even sharing the report itself if you wish. We just ask you to tag @cledara when you do so. If you have any questions, or would like to contribute to the final report with a quote, you can contact us at marketing@cledara.com

In 2024, the SaaS industry outlook is cautious, to say the least. Overall, while software companies are still growing, the rate has slowed, and the future remains uncertain despite potential interest rate declines.

The reasons are many. Slower growth, investor wariness, geopolitical instability, and recession concerns have all played a part in this complicated landscape. Not to mention the impact AI has had in the market. 

Cledara’s latest Software Spend Report provides critical insights into how companies of various sizes and regions manage their software spend, highlighting key trends, benchmarks, and challenges.

Key Findings:

1. Software Spend Benchmarks: As companies grow, their software spend per full-time employee (FTE) drops significantly.
2. Regional Variations: US companies consistently outspend their UK and EU counterparts across all company sizes, particularly at early growth stages. 
3. Hidden Costs of Software: The most common sources of wasted spend include unused licenses, redundant tools, and duplicate functionalities across departments.
4. AI Adoption and Spending: AI spending has grown in the past year, with tools like ChatGPT leading the charge. However, despite widespread adoption, only a percentage of companies report seeing tangible value from their AI investments.
5. Perceptions of Software: High-growth companies are more likely to view software as an investment rather than an expense. 

Research for this Report

Input from Cledara: At Cledara, we have a unique vantage point to observe the AI landscape. Our platform helps small and medium-sized tech companies manage their software, from tracking usage to paying for tools. Since its inception, Cledara has gathered data from over 1 million transactions with more than 5 thousand vendors. This gives us a bird's-eye view of how businesses purchase and use software in the real world. 

Input from 200+ Companies: To complement the data we hold, we ran a survey with more than 200 tech companies with less than 200 staff across the United States (US), United Kingdom (UK), and Europe (EU) to understand how businesses were perceiving AI.

Chapter 1: Software Spend Benchmarks

1a. Software Spend Benchmarks by Company Size

I'm sure it comes as no surprise that as company size increases, so does software spend. Here we have the average spend at different sizes before we dive into more detailed views around regions and per FTE. 

‍Key findings

• Smaller companies (0–20 employees) spend an average of $121,336 annually on software.
• Mid-sized companies (50–100 employees) spend around $193,716.
• Larger SMBs (100–200 employees) invest approximately $251,119 in software annually.

1b. Software Spend per FTE

One of the most striking trends is the significant efficiency gained as companies grow. The software spend per full-time employee (FTE) drops dramatically from around $8,000 for companies with up to 20 staff to just $1,741 for those with 100-200 staff. That is 4 times less expensive. 

‍Note: Bigger companies are not necessarily more efficient. They need to buy the same amount of tools, but because they have more employees, they usually just have to add seats, which tend to be cheaper than a new subscription.

Key findings

• Startups (0–20 employees) spend $8,000 per FTE.
• This figure drops considerably to $2,583 per FTE for companies with 50–100 employees.
• This falls further to $1,741 for larger SMBs (100–200 employees).

What it means for you:

• For Startups (0–20 employees): Your high per-employee spend isn't unusual. You're likely investing in foundational tools that will scale with your growth. Focus on selecting versatile, scalable solutions that can grow with you.‍
• For Growing Companies (20-50 employees): This is a critical phase for optimizing your software stack. Look for opportunities to consolidate tools and negotiate better rates as your user numbers increase.‍
• For Established Companies (50–200 employees): You're likely seeing economies of scale kick in. However, with size comes complexity. Be vigilant about unused licenses and redundant tools to keep your per-employee spend efficient.

1c. Regional Variations in Software Spend

The survey reveals significant geographic differences in software spending patterns across the US, UK, and EU markets. These variations offer crucial insights into how companies in different regions approach software investment and adoption.

Key findings

1. US Dominance: The United States consistently outspends both the UK and EU at every stage of company growth. This gap is most pronounced among smaller companies, but persists even as organizations scale.
2. UK and EU Alignment: While the UK and EU show lower overall spend compared to the US, their spending patterns closely mirror each other, suggesting similar market dynamics and approaches to software adoption in these regions.
3. Scaling Patterns: All regions show increased total software spend as companies grow, but the rate of increase varies.

1d. Regional Variations in Software Spend by FTE

To better understand these differences, let's examine the spend per full-time employee (FTE):

This chart reveals even more nuanced insights

1. Early-Stage Investment: US companies show a significantly higher spend per FTE at the 0-20 staff level, investing nearly twice as much per employee compared to their UK and EU counterparts.
2. Convergence at Scale: As companies grow, the spend per FTE in the US aligns more closely with that of the UK and EU. By the 100-200 employee range, the gap narrows considerably.‍

Potential Factors Influencing Regional Differences

Higher per FTE spending in the US, may be driven by:

• More mature market with early tech adoption
• Larger funding rounds for startups
• Greater competition driving rapid innovation
• Regulatory differences and higher labor costs

These factors create an environment where significant software investment is often viewed as crucial for success and maintaining a competitive edge.

What it Means for You: 

US Companies

1. Your higher initial investment in software may be providing a competitive edge. Ensure you're maximizing the value of these tools.
2. As you scale, look for opportunities to optimize spend. Your per-FTE investment decreases faster than in other regions when managed correctly.
3. Evaluate whether your software investments are translating into proportional productivity or competitive advantages.

UK + EU Companies

1. Consider whether increased early investment in software could accelerate your growth. Are there mission-critical tools you're delaying adoption of due to cost concerns?
2. Your lower initial spend might indicate a more cautious approach to software adoption. While prudent, ensure this isn't hindering innovation or growth.
3. Investigate US companies in your industry. Are there software-driven strategies you could adapt to your market?

By understanding these regional dynamics, companies can make more informed decisions about their software investments, potentially uncovering opportunities for strategic advantages or efficiency gains.

1e. Number of Software Tools

At Cledara, we've uncovered a startling trend: businesses consistently underestimate their software usage by an average of 40%. Our data reveals that for every 10 tools a company thinks they're using, there are actually 14 in play.

This discrepancy stems from two key factors:

1. Decentralized Management: Without a unified view of software across teams, it's easy to lose track of what's being used company-wide.
2. Shadow IT: Unofficial software purchases and usage spread across teams, payment methods, and even personal accounts, flying under the radar of official oversight.

As organizations grow, so does this gap between perceived and actual tool usage. This widening disparity underscores the escalating challenge of effective software management in scaling businesses.

Chapter 2: The Hidden Costs of Software

2a. Wasted Spend: A Growing Concern

As companies scale, the challenge of managing software efficiently becomes increasingly complex. Our data reveals a troubling trend:

• Organizations with 100–200 staff waste an average of $89,033 (34%) of their software budget
• Companies with over 200 staff waste a staggering 48% of their software spend

This trend highlights the urgent need for better software management practices, especially in rapidly growing companies.

Common Sources of Wasted Spend

1. Unused Seats and Tools
   • Paying for more licenses than actively used employees
   • Continuing to pay for tools that are no longer in use
2. Duplicate Tools
   • Different teams using separate tools for the same purpose
   • Example: One department using DocuSign while another uses HelloSign
3. Similar Apps with Overlapping Features
   • Multiple tools with crossover functionalities that could be consolidated
   • Missed opportunities for cost savings through feature consolidation

This trend underscores the growing challenge of effectively managing software as organizations become larger and more complex. It points to a clear need for better software management practices, especially in rapidly growing companies.

2b. Cloud and Advertising Spend

In addition to general software spend, we also examined spending patterns on cloud services and advertising to see how these strategic expenses compare to software. We found that the distribution is similar with spend on the 'big three' similar across business sizes.

Chapter 3: Perceptions and Future Outlook

3a. Software: Expense or Investment?

The majority of businesses still view software more as an expense than an investment. However, this perception shifts significantly when we compare high-growth companies to the rest of the market:

Fast-growing companies are more likely to treat software as an investment rather than an expense. This mindset correlates with higher software spend per FTE among these high-growth organizations.

What It Means for You 

High-growth companies often see software as a critical enabler of scalability and efficiency. By viewing software as an investment, these companies may be more willing to adopt cutting-edge tools that drive productivity and innovation. Consider re-evaluating your perception of software spend – could a shift in mindset unlock new growth opportunities?

3b. Perception of Current Spend

To get an idea of how the 'big three' expenses of Software, Cloud and Advertising are currently perceived, we asked we asked CFO's and Founders if they thought they were overspending, or underspending.

• 45% of companies believe they are overspending on software.
• The majority of companies (66%) believe they are spending the right amount on cloud services.
• Interestingly, most companies (52%) thought they were underspending on advertising.

3c. Future Spending Intentions

Looking ahead, the outlook for software spending remains positive:

• 58% of companies plan to increase their software spend in the coming year.

This trend suggests continued growth in the software market and highlights the increasing importance of digital tools in business operations.

What It Means for You 

As the majority of companies plan to increase their software investments, staying competitive may require keeping pace with these spending trends. However, focus on strategic investments that align with your business goals rather than increasing spend for its own sake.

Chapter 4: The AI Revolution - The Future of Software? 

It's impossible to ignore the seismic impact of artificial intelligence on the software landscape. Our recent AI Usage, Spend and Outlook 2025 report offers fascinating insights into how AI is reshaping the way businesses approach software. Here's a brief overview of key findings:

4a. AI Adoption and Usage

1. Exponential Growth: Since January 2023, we've seen exponential growth in AI tool usage, with ChatGPT leading the charge.
2. Diverse Ecosystem: While ChatGPT dominates with 33 times more usage than its closest competitor, emerging players like Perplexity and Claude are showing impressive growth rates of 238% and 367% respectively since January 2024.
3. Comparison to Traditional SaaS: Despite high adoption rates, AI tools still see significantly less usage than established SaaS platforms. For instance, ChatGPT has 9 times less usage than HubSpot, despite being adopted by more companies.

4b. AI Spending Trends

1. Rapid Growth: AI spending grew by a staggering 446% in the last 12 months, compared to 36% growth in overall SaaS spending.
2. Emerging Players: While giants like ChatGPT and OpenAI continue to grow, niche AI tools are seeing explosive growth. For example, Clay, an AI-powered data enrichment tool, has seen 600% growth since January 2024.
3. Department-wise Adoption: Marketing leads in AI spend, with Sales showing the fastest growth rate. This indicates AI's increasing role in customer-facing operations.

4c. Value Perception and Future Outlook

1. Widespread Experimentation: 82% of surveyed companies are using or experimenting with AI tools.
2. Value Realization Gap: However, only 46% of these companies report seeing tangible value from their AI investments so far.
3. Optimistic Future: Despite mixed results, 54% of businesses plan to increase their AI spend in the coming year, indicating confidence in AI's potential.
4. Job Impact: Contrary to popular fears, only 6% of businesses expect to reallocate funds from areas like payroll to fund AI initiatives, suggesting AI is viewed more as a complement to human labor than a replacement.

The Big Picture

The AI revolution is still in its early stages, with businesses enthusiastically adopting these tools but still working to unlock their full potential. As AI technologies mature and businesses develop more strategic implementation approaches, we expect to see a significant impact on overall software spending patterns and usage trends.

Conclusion: Navigating the Software Landscape

As we look to the future, it's clear that software will continue to play a crucial role in business success. The data presented in this report highlights several key takeaways:

1. Efficiency through growth: Larger companies can achieve significant efficiencies in their software spend, but they must be vigilant about managing waste.
2. Regional differences matter: US companies tend to invest more heavily in software, especially in early growth stages. Companies in other regions might consider whether increased software investment could drive growth.
3. The investment mindset: High-growth companies are more likely to view software as an investment. This perspective correlates with higher spending and potentially faster growth.
4. Room for optimization: With high levels of wasted spend, especially in larger organizations, there's a clear opportunity for better software management practices.
5. Future growth: With the majority of companies planning to increase software spend, the market is set for continued expansion.

What to Do Next

Based on the insights from this report, here are some practical steps your business can take:

1. Conduct a Software Audit: Take stock of all the software tools your company uses. Identify any redundancies or underutilized licenses.
2. Implement a Software Management System: Consider adopting a centralized platform for managing software licenses, usage, and costs.
3. Reassess Your Software Budget: Compare your spending to the benchmarks in this report. Are you investing enough in software to stay competitive?
4. Focus on ROI: For each software tool, evaluate its return on investment. Consider both quantitative metrics (like time saved) and qualitative benefits (like improved collaboration).
5. Plan for Growth: If you're a high-growth company or aspiring to be one, consider how your software strategy can support and enable that growth.
6. Optimize Cloud and Ad Spend: Given the perceptions around cloud and advertising spend, reassess your allocations in these areas.
7. Stay Informed: Keep abreast of software trends in your industry. The landscape is evolving rapidly, and staying informed can help you make strategic decisions.

As businesses navigate this complex landscape, the key to success will be striking the right balance between investment and efficiency. By treating software as a strategic asset and implementing robust management practices, companies can leverage these digital tools to drive growth and maintain a competitive edge in an increasingly digital world.